Bay Back Simulation
Decision Rationale
Decision 1 In determining our initial strategy, we knew that we wanted to focus on the product that would be most profitable and key in on features that are important to the customer. Looking at product sales in 2008, the NiMH sold 28.0 M units and the Ultracapacitor sold only 4.3 M units. Based on these sales, the NiMH generated $280.3 M and the Ultracapacitor generated $86.2 M. In addition, when reviewing the Income Statement, the NiMH produced a profitable contribution in the years 2006 through 2008. The Ultracapacitor, on the otherhand, produced an unprofitable contribution during the same timeframe. Based on these figures, we decided to focus on the NiMH. We relied on the income statement to determine the forecast for both the NiMH and Ultracapacitor. In 2007, the NiMH made $3.25 M per unit and in 2008, made $3.41 M per unit. This is an increase of approximately 5%. We felt this trend would continue and decided to increase our forecast for the upcoming year, however, instead of increasing our forecast by 5% our team wanted to be conservative and increased our forecast by 3% which equaled a forecast of 28.8 M units. In 2007, the Ultracapacitor made -4.3 M per unit and in 2008, made -4.66 M per unit. This is a decrease of approximately 8%. Under the same reasoning as the NiMH, we decreased the forecast by 5% to be conservative and forecasted 4.1 M units. When deciding where to invest our money, we reviewed what features were most important to the customer. Energy density was rated the highest among all features so we decided to focus on this one. We chose energy density within the NiMH due to its historical profitability. The minimum annual cost for this project was $3M. Since this was our first round of the simulation, we decided to invest the minimum required. Our team also felt it was important to focus on process improvement. Learning from the GEOX case study, in order to compete with surrounding competition, a company must
Decision 1 In determining our initial strategy, we knew that we wanted to focus on the product that would be most profitable and key in on features that are important to the customer. Looking at product sales in 2008, the NiMH sold 28.0 M units and the Ultracapacitor sold only 4.3 M units. Based on these sales, the NiMH generated $280.3 M and the Ultracapacitor generated $86.2 M. In addition, when reviewing the Income Statement, the NiMH produced a profitable contribution in the years 2006 through 2008. The Ultracapacitor, on the otherhand, produced an unprofitable contribution during the same timeframe. Based on these figures, we decided to focus on the NiMH. We relied on the income statement to determine the forecast for both the NiMH and Ultracapacitor. In 2007, the NiMH made $3.25 M per unit and in 2008, made $3.41 M per unit. This is an increase of approximately 5%. We felt this trend would continue and decided to increase our forecast for the upcoming year, however, instead of increasing our forecast by 5% our team wanted to be conservative and increased our forecast by 3% which equaled a forecast of 28.8 M units. In 2007, the Ultracapacitor made -4.3 M per unit and in 2008, made -4.66 M per unit. This is a decrease of approximately 8%. Under the same reasoning as the NiMH, we decreased the forecast by 5% to be conservative and forecasted 4.1 M units. When deciding where to invest our money, we reviewed what features were most important to the customer. Energy density was rated the highest among all features so we decided to focus on this one. We chose energy density within the NiMH due to its historical profitability. The minimum annual cost for this project was $3M. Since this was our first round of the simulation, we decided to invest the minimum required. Our team also felt it was important to focus on process improvement. Learning from the GEOX case study, in order to compete with surrounding competition, a company must